Financial markets were given a fillip by today’s GDP figures showing that the UK has avoided a triple dip recession. Sterling jumped more than a cent to $1.54 after the Office for National Statistics revealed that the economy managed to grow by 0.3% in the first quarter of 2013, ahead of the expectations of most City analysts.
The UK currency’s trade-weighted index rose to its highest level in two- and-a-half months and sterling shot to a three-week high against the euro at €1.18. “Compared to the eurozone’s five straight quarters of declining output, the UK economy, and sterling’s prospects, are both looking up” said Chris Redfern, of the forex specialists Moneycorp.
The FTSE 100 share index also initially shot up 20 points in response to the positive news, which showed that the bad weather between January and March had a much lesser impact on output than feared.
However, UK Gilt yields were up by around 3 basis points at 1.72% as traders bet that the positive figures would reduce the prospects of the Bank of England enacting more monetary stimulus. “Signs that the UK economy may be growing, albeit weakly, are probably enough to put to rest any chance that the Bank of England would expand QE in May” said David Tinsley of BNP Paribas.
Nawaz Ali of Western Union Business Solutions said: “With the Federal Reserve likely to keep pressing on with its open-ended stimulus plan, and economic data from the euro zone pressing the European Central Bank to cut rates, global investors may start warming to the British pound again.”
